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Has Joe Cassano Committed Perjury: AIG Took Subordinated Pieces Of CDOs It Insured

Tyler Durden's picture


For those who have long been hoping to see AIG's Joe Cassano, the man who more than anyone let AIG become the risk behemoth it was when it blew up, end in jail, whether it was for massive fraud, or any other violation of justice, may be one step closer to the vindicaation. A discovery by David Fiderer today discloses that the former head of AIG's Financial Products group may have just purjured himself when previously, under oath, he said that AIG never took less than super senior tranches of CDOs it insured. It turns out that the firm was quite often double dipping lower in the risk stack and gobbling subordinate tranches alongside all the now insolvent European and Japanese banks, better known as "investors" in the Goldman rolodex of biggest morons in the world.

AIG Took Subordinated Pieces of CDOs It Insured


For more than three years, AIG's Joe Cassano has insisted that his firm was careful only to assume the credit risk on the "super-senior" tranches of a CDO, only the most senior of tranches rated triple-A. A document released by the FCIC shows that AIG also among the largest investors in some of the most deeply subordinated tranches of the CDOs that it insured. According to a schedule of trades prepared by Goldman Sachs detailing trades on its notorious ABACUS synthetic CDOs, AIG bought subordinate tranches of ABACUS 2005-3, ABACUS 2005-CB1, and ABACUS 2005-2. . The other big "investor" in the subordinated tranches was Goldman's own CDO desk. This new information demonstrates, once again, that the CDO market was more of an orchestrated illusion than it was a reality, and that almost everything is kept secret in order to protect the guilty.

One of the many things that are kept from public view is the capital structure of these deals.  Unlike other synthetic deals, such as ABACUS 2007-AC1, the most senior slice of the CDO, the unfunded "super-senior" part that is insured by AIG, is not publicly rated.  So the public has no way of discerning the overall size of the deal. That information was discerned from the trade confirmations between AIG and Goldman. The sizes of the subordinate tranches for ABACUS 2005-3 were not readily available from public sources. This new information suggests that AIG may have purchased pieces of other subordinate tranches in other CDOs that it insured, and that the people at AIG were even more cavalier, and less forthcoming, and their risk management than had been previously suspected.



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Fri, 01/28/2011 - 14:19 | Link to Comment Putty
Putty's picture

Say it ain't so Joe.

Fri, 01/28/2011 - 14:21 | Link to Comment gwar5
gwar5's picture

say it ain't so........

We need jail time for these reptiles

Sat, 01/29/2011 - 01:17 | Link to Comment Magat Guru
Magat Guru's picture

There are better (yes, better, not worse!) "karmic adjustments" than jail time for white-colar perps ----- the dreaded COMMUNITY SERVICE! 

Ifor one would love to see the Blankfeins & Cassanos of the world putting in days months years of their "valuable" time cleaning schools, peeling spuds & serving soup to their homeless victims, counseling domestic violence & rape victims.... in short, spend some quality time looking in the eyes of plain folks whose exploitation has fueled their lifestyle over the years.

Besides, we'd either have to build more jails or let out some potheads early to make room. I just don't think the Prison Industrial Complex should profit from the misery!

Fri, 01/28/2011 - 14:22 | Link to Comment Duuude
Duuude's picture

Guppies are not filling.

Fri, 01/28/2011 - 14:23 | Link to Comment treemagnet
treemagnet's picture

Was it snowing then?

Fri, 01/28/2011 - 14:26 | Link to Comment LongSoupLine
LongSoupLine's picture

i seem to recall Bernanke "under oath" saying he wouldn't monetize the debt either.

Fri, 01/28/2011 - 14:33 | Link to Comment djb1953
djb1953's picture

But the BerNANK is not lying when he said that.

He is not monetising but investing our hard earned money to get a better rate of return on prime AAA securities to be held until maturity or death, whichever comes first.

Fri, 01/28/2011 - 15:03 | Link to Comment I Am The Unknow...
I Am The Unknown Comic's picture

I am 100% certain The Bernank lied under oath. 

Joe's just trying to get a seat in the boat next to The Bernank.

Fri, 01/28/2011 - 14:29 | Link to Comment LiquidBrick
LiquidBrick's picture


For evidence of insurance fraud on AIG and Bruce Baldinger see this link.

Fri, 01/28/2011 - 14:31 | Link to Comment's picture

Joe's defense: "to MY knowledge we never took less than..."

Like Nixon's crooks at Watergate hearings "to the best of my recollection..."

Rule #1 - the rich are above the law

Fri, 01/28/2011 - 15:11 | Link to Comment sodbuster
sodbuster's picture

Rule #2- I can't remember a damn thing- until I get a substantial book deal when it's all over.

Fri, 01/28/2011 - 14:39 | Link to Comment plocequ1
plocequ1's picture

Time to call Perry Mason. Rally on

Fri, 01/28/2011 - 14:55 | Link to Comment chrisd
chrisd's picture

Let's not forget the man who led the Security Lending business at AIG. He should get no less blame than Cassano for trying to juice riskless 2% returns and investing in subprime instead.

Fri, 01/28/2011 - 14:58 | Link to Comment New Revolution
New Revolution's picture

Reptiles.... your getting close.

Fri, 01/28/2011 - 14:59 | Link to Comment chet
chet's picture

Someone held accountable for something?  I'll believe it when I see it.

Fri, 01/28/2011 - 15:02 | Link to Comment SparkyvonBellagio
SparkyvonBellagio's picture

Yessssss!  Hang'em High!



Fri, 01/28/2011 - 15:09 | Link to Comment sodbuster
sodbuster's picture

>Has Joe Cassano Committed Perjury?<

Tell me- is the Pope Catholic?



Fri, 01/28/2011 - 15:10 | Link to Comment Dr. Porkchop
Dr. Porkchop's picture

Why should the head of a division, or CFO or anyone high up be expected to know or be responsible for what they sign off on? That's preposterous... they are doing God's work, it can't be quantified or constrained by such mundane things as accounting principles or moral hazard or the rule of law! I'm tired of the religious discrimination of these financial spiritual leaders! </sarc>

Fri, 01/28/2011 - 15:13 | Link to Comment rational
rational's picture

I know this is complex but try to follow along:  Cassano's group INSURED only the senior-most tranche.  Other parts of AIG, not under Cassano, INVESTED in the junior tranches.  So whatever  you think about AIG risk management, Cassano did not commit perjury.

Fri, 01/28/2011 - 15:25 | Link to Comment Greater Fool
Greater Fool's picture

A distinction without a difference. The only practical difference between selling leveraged super-senior and subordinated protection is how much cash you have to supply upfront.

Fri, 01/28/2011 - 16:49 | Link to Comment rational
rational's picture

I believe the point under discussion is perjury not practicality.

Fri, 01/28/2011 - 17:10 | Link to Comment Greater Fool
Greater Fool's picture

My point is that whether the tranche you sell protection on is funded or unfunded is immaterial to the actual risk exposure at the level of the instrument. The matter under discussion is clearly whether AIG took on riskier exposures than super-senior. The answer to that does not stop being "yes" just because they posted collateral to cover losses in advance.

Fri, 01/28/2011 - 21:41 | Link to Comment rational
rational's picture

Yes they took additional exposure to the deals in their investment portfolio, that's obvious.  The title of the post though is: "Has Joe Cassano Committed Perjury" so I'm not clear why you don't think that is the matter under discussion. 

Fri, 01/28/2011 - 15:26 | Link to Comment anony
anony's picture

He may not have committed perjury, but there's bound to be some things he did that were illegal, if not illegal then unethical, if not unethical then immoral, if not immoral then certainly suspect, if not suspect then completely pornographic, if not pornographic, then duplicitous, if not duplicitous then tasteless, if not tasteless, then a tad disingenuous, if not disingenuous, then innovative, if not innovative, then derivative.

A ha.

Give the man a medal.

Fri, 01/28/2011 - 15:16 | Link to Comment MarketTruth
MarketTruth's picture

No one goes to jail, only fined for about 10% of their profits as a VIG to the PTB. C'mon ZeroHedge, you damn well know that NO ONE GOES TO JAIL if they are banksters or the like with dirt on other banksters.

Fri, 01/28/2011 - 15:49 | Link to Comment MrBoompi
MrBoompi's picture

When the average American is no better off than the average Egyptian, these bankers will hiding behind bars.

Fri, 01/28/2011 - 15:28 | Link to Comment SteveNYC
SteveNYC's picture

Has a jail sentence ever been more well-deserved?

Fri, 01/28/2011 - 16:23 | Link to Comment Don Smith
Don Smith's picture

Tough question - answer is no, but close contenders riddled throughout the financial "services" industry.

That bastard needs to be perp-walked.  Through the streets of Detroit.  At high noon on the 29th of the month, before SNAP cards have been recharged or unemployment checks have arrived.  WIth the cameras off and the police pointedly looking away.

Fri, 01/28/2011 - 16:33 | Link to Comment stilgar
stilgar's picture

For this crowd of Al Capones, perjury is nothing more than a mere "technicality". Kindly move on now.

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